Your T4 reports Canadian employment income. Your 1040 needs that income too, in USD. Here is what the conversion actually involves.
Lou is a tax-preparation tool, not a tax advisor. This article explains how Canadian employment income appears on a US tax return. For advice on your specific situation, work with a qualified tax professional.
If you're a US citizen or green card holder working in Canada, your employer issues a T4 at the end of each year. That slip reports your Canadian employment income, taxes withheld, CPP contributions, and EI premiums. It is what you need to file your Canadian return.
Your US return needs the same income. But a T4 is not a W-2. None of the boxes map directly to IRS form lines, and the amounts are in Canadian dollars.
What is on a T4#
The T4 has numbered boxes. Box 14 is employment income. Box 22 is income tax deducted. Boxes 16 and 17 are CPP contributions. Box 18 is EI premiums.
The box numbers mean nothing to the IRS.
The currency conversion#
IRS rules require foreign income to be reported in US dollars. The rate is the IRS annual average exchange rate for that tax year, not the current rate and not the rate you used at your bank.
The IRS publishes this rate each year. At recent exchange rates, a T4 showing $80,000 CAD in employment income works out to roughly $59,000 USD on Form 1040. Every amount gets converted: income, taxes withheld, CPP, EI.
Where the income goes#
Employment income from Box 14 goes on line 1 of Form 1040, same as W-2 wages. Canadian income tax withheld (Box 22) is not entered directly. It goes into Form 1116, the foreign tax credit form.
The foreign tax credit prevents double taxation and offsets Canadian taxes paid against any US tax owed on the same income - often significantly.
A zero tax bill is still a return to file.
T3 and T5 slips#
Employment income from a T4 is usually the straightforward part. Investment income is where things get complicated.
A T5 reports interest and dividends from Canadian accounts and investments. That income goes on Schedule B, with foreign taxes on Form 1116.
A T3 reports income from Canadian mutual funds and trusts. Some Canadian mutual funds and ETFs may be PFICs (Passive Foreign Investment Companies) under US rules, which requires Form 8621.
T5008 reports capital gains from Canadian investments. That goes on Schedule D and Form 8949.
Where Lou fits#
Lou takes your T4, T3, T5, T5008, and other Canadian slips, extracts the data locally in your browser, converts CAD to USD at the correct IRS annual average rate, and maps everything to the right form lines.
No manual entry. No server uploads. You review every line before you file.
Free to use. You pay to download the completed forms. 15-day refund if Lou does not work for your situation.
Lou is a tax-preparation tool, not a tax advisor.
https://lou.bigtimedesign.ca